桃汁影院

Note 12. Stockholders’ Equity

Preferred Stock

We are authorized to issue 10,000,000 shares of “blank check” preferred stock with designations, rights and preferences as may be determined from time to time by our Board of Directors.  As of April 30, 2018 and 2017, we had no shares of preferred stock issued and outstanding.

Common Stock

On June 21, 2016, the Company issued 208,333 shares valued at $400,000 and made a cash payment of $400,000 to a warrant holder in exchange for the buyback of 1,120,968 warrants. The Company re-valued the fair value of the warrants on the buyback date which equaled $594,000 and accordingly, the Company recorded an expense associated with the buyback of $206,000.

On July 31, 2016, the Company issued 29,167 shares to two IR firms for services.  16,667 shares were issued for services under a six month contract with a value of $30,000. 12,500 shares were issued for services under a one year contract with a value of $22,500. The Company recorded a prepaid for the value of the services and is amortizing over the respective service periods.

Following approval from its shareholders, on January 10, 2017, the Company effected 1-for-12 reverse split of its common stock. All references to common shares and per-share data for all periods presented in this report have been retroactively adjusted to give effect to this reverse split.

On April 7, 2017, the Company raised $7,500,000 through the issuance of 2,000,000 common shares at a price of $3.75. The net proceeds were $6,996,000 and there were additional cash offering costs paid of approximately $57,000. In addition, one firm received 20,000 shares of common stock for their services valued at $3.75 per share or $75,000.

Effective May 24, 2017, the Company entered into waiver agreements with all of its investors in the April 2017 common stock offering. In consideration for waiving their registration rights, the Company paid to each of the investors 1.5% of their investment amount in the offering. The total amount paid was $112,500 and was recorded in general and administrative expenses during the quarter ended July 31, 2017.

In November 2017, the company issued 5,000 restricted shares each to two consultants assisting with establishing the new campus. The shares were valued at $88,699 based on the trading price of $8.87 on the grant date and recorded as a prepaid asset being amortized over the six month term of the agreement.

On December 1, 2017 certain assets were acquired and certain liabilities assumed from Educacion Significativa, LLC (dba United States University) by United States University, Inc. United States University, Inc. is a wholly owned subsidiary of 桃汁影院 Inc. (“AGI”). As part of the purchase price the company issued 1,203,209 shares of AGI stock which were valued at $10,215,244 based on the quoted closing price of $8.49 per share as of November 30, 2017. (See Note 17)

On April 18, 2018 and April 23, 2018, the Company raised a total of $23,023,000 through an equity raise of 3,220,000 shares of common stock at $7.15 per share. The number of shares sold on April 18, 2018 was 2,800,000 and then another 420,000 shares were sold on April 23, 2018. The cost of raising these funds was approximately $2.2 million and was recorded as a reduction of equity. Proceeds from the equity raise were first used to repay the senior secured term loan and the remainder to support the operations of USU and the pre-licensure campus. (See Note 18)

During fiscal 2018, the Company issued 171,962 shares of common stock upon the cashless exercise of warrants.

During fiscal 2018, the Company issued 87,775 shares of common stock upon the exercise of warrants and received proceeds of $246,380.

During fiscal 2018, the Company issued 136,563 shares of common stock upon the exercise of stock options and received proceeds of $475,825.

Warrants

A summary of the Company’s warrant activity during the year ended April 30, 2018 is presented below:

On June 24, 2016, the Company issued 208,333 shares and a cash payment of $400,000 to a warrant holder in exchange for 93,414 warrants.

On August 31, 2016, the Company announced that it had closed on a $3 million credit line with its largest shareholder. The Company paid a 2% origination fee of $60,000 and issued 62,500 common-stock warrants at an exercise price of $2.40 per share, which are redeemable by the Company if the closing price of its common stock averages at least $3.00 per share for 10 consecutive trading days

In connection with the Senior Secured Term Loan that was finalized on July 25, 2017, the Company issued 224,174 5-year warrants at an exercise price of $6.87. (See Note 10)

The Company issued 259,737 shares of Common Stock in conjunction with the cash and cashless exercise of 398,526 warrants. The Company received $246,380 in conjunction with the cash exercises.

Stock Incentive Plan and Stock Option Grants to Employees and Directors

On March 13, 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”) that provides for the grant of 1,691,667 shares effective November 2015, 2,108,333 shares effective June 2016 and 3,500,000 shares effective July 2017, in the form of incentive stock options, non-qualified stock options, restricted shares, stock appreciation rights and restricted stock units to employees, consultants, officers and directors. As of April 30, 2018, there were 1,037,747 shares remaining under the Plan for future issuance. The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to employees during the year ended April 30, 2018.

The Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on the average of the expected volatilities from the most recent audited financial statements available for comparative public companies that are deemed to be similar in nature to the Company. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

A summary of the Company’s stock option activity for employees and directors during the year ended April 30, 2018, is presented below:

On May 19, 2016, the Company granted to each of its eight non-employee directors 12,500 five-year stock options. The Company granted an additional 4,167 five-year stock options to the chairman of the Compensation Committee and to the chairman of the Audit Committee.  These options are exercisable at $1.92 and vest in three years.  For the directors receiving 12,500, the fair value was approximately $7,500 per grant and for the two directors receiving 16,667 options, the fair value on the date of grant was approximately $10,000.

On June 20, 2016, the Company granted 2,500 options to an employee.  The fair value was approximately $5,000 and vest over 3 years.

On June 23, 2016, the Company granted 166,667 stock options to the Chief Operating Officer, 58,333 stock options to the Chief Academic Officer and 25,000 to the Chief Financial Officer. The five-year options are exercisable at a price of $1.99 and vest over three years. On the date of grant, the grant to the Chief Operating Officer had a fair value of approximately $100,000, the grant to the Chief Academic Officer had a fair value of approximately $35,000 and the grant to the Chief Financial Officer had a fair value of approximately $15,000.

On September 12, 2016, the Company extended approximately 420,000 options that were expiring in 2017. The new expiration dates were extended three years.  The cost associated with these extensions is approximately $150,000, which represents the difference between the fair value of the options before the modification and the fair value immediately after the modification.  These extended options will vest over the next three years.

On October 1, 2016, the Company granted 20,417 options to a pool of employees. The fair value was approximately $17,000 and the options vest over 3 years.

On November 18, 2016, under the Plan the Company granted 41,667 five-year options to each of the two new directors elected at the annual meeting held that month. These options are exercisable at $3.24 per share. The options were valued at $40,000 each and vest over a three year term, subject to continued service.

On January 6, 2017, the Company granted 69,583 options to a pool of employees. The fair value was approximately $225,000 and the options vest over three years.

From February 1, 2017 to April 17, 2017 inclusive, the Company granted new employees a total of 20,000 options with an exercise price ranging from $3.60 to $4.50.  All of these options are five year options that vest over 3 years.  The fair value of the group of options is $22,710.

On April 12, 2017, the Board of Directors was issued a total of 113,333 five-year options that vest of 3 years.  The strike price was $4.32 and the fair value is $140,533.

The Company recorded compensation expense of $338,294 for the year ended April 30, 2017 in connection with employee stock options.

On May 13, 2017, the Company granted its executive officers a total of 500,000 five-year options to purchase shares of the Company’s common stock under the Plan. The options vest annually over three years, subject to continued employment at each applicable vesting date, and are exercisable at $4.90 per share. The Chairman and Chief Executive Officer received 200,000 options with a fair value of $282,000, the Chief Operating Officer received 200,000 options with a fair value of $282,000, the Chief Academic Officer received 70,000 options with a fair value of $98,700 and the Chief Financial Officer received 30,000 options with a fair value of $42,300.

In May 2017, the Company issued 5,500 stock options to various employees at exercise prices ranging from $4.95 to $5.10 per share.

Effective June 11, 2017, the Company granted the Chief Academic Officer 30,000 five-year options. The options vest quarterly over a three-year period in 12 equal quarterly increments with the first vesting date being September 11, 2017, subject to continued employment on each applicable vesting date. The options are exercisable at $6.28 per share and the fair value is $54,000.

On August 21, 2017, 52,250 options were issued to 24 employees with an exercise price of $5.95 per share and a fair value of $89,348.

On January 4, 2018, 180,000 options were issued to the board of directors with an exercise price of $9.07 per share and a fair value of $421,200.

On January 17, 2018, 74,000 options were issued to 23 employees with an exercise price of $8.57 per share and a fair value of $149,480.

On February 12, 2018, 31,000 options were granted to 21 employees with an exercise price of $7.31 per share and a fair value of $54,250.

On April 5, 2018, 19,000 options were granted to 24 employees with an exercise price of $7.31 per share and a fair value of $33,250.

During the year ended April 30, 2018, the company issued 136,563 shares of common stock in conjunction with the exercise of 63,838 stock options. The company received $475,825 related to these exercises.

As of April 30, 2018, there was $1,439,283 of unrecognized compensation costs related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 2.0 years

The Company recorded compensation expense of $642,566 and $338,294 for the years ended April 30, 2018 and 2017, respectively, in connection with stock options.